Sorry if this has already been posted. I have 680 CMGI messages that are unread on my bookmark list. The last two paragraphs are something to be remembered as we ride this out.
From internetstocknews.com
THE NEXT INTERNET VC SUPERSTAR
by Mike Ogburn
Maybe e-ignorance is e-bliss.
After all, if you aren't scouring the financial web sites and message
boards searching for the next Internet rocket, you are likely oblivious to
the “next CMGI” phenomena.
That, in Internet stock parlance, is the rash of “comparison marketing” by
companies that share similar business models (and sometimes even less) with
Net high-flyers. It's not necessarily a bad thing, but it gets old quick.
Of these companies, some are quite legitimate. A few may even one day burn
brighter than the star they want to be. But, in most instances, there's
nothing like the real thing.
Examples of this trend cut across the Net. Star Media (STRM) aims to be the
“AOL of Latin America.” United Pan Europe (UPCOY) is the “@Home (ATHM) of
Europe.” And NetGravity (NETG), 24/7 Media (TFSM) and AdForce (ADFC) are
all going to be the next Doubleclick (DCLK).
One stock in particular – CMGI – seems to line up the wannabes from here to
Andover. There are at least a half-dozen companies seeking “next CMGI”
status, and for good reason. The firm's venture capital/incubator model is
made for the Internet.
By investing in upstart private companies, cultivating the businesses and
then either selling or taking the firms public, CMGI has been able to score
several thousand percent returns on some of its investments. Sales of two
companies gave CMGI an early piece of Amazon (AMZN) and America Online
(AOL). Its windfall from the IPOs of Lycos (LCOS) and Geocities (GCTY)
could provide the company with enough revenue to post profits for the next
10 quarters. And CMGI still nurtures around 40 companies – including the
mysterious powerhouse, iCast – in its stable of “incubating” investments.
Along the way, the company's stock price just happened to appreciate
35,000% since it went public in 1994.
So, who wants to be the next CMGI? Better yet, who doesn't?
The list should begin with Safeguard Scientific (SFE), a firm that has been
bringing technology companies public long before CMGI was even a gleam in
David Wetherell's eyes. Safeguard has traded on the New York Stock Exchange
since 1971 and boasts investments in such companies as Novell (NOVL),
Cambridge Technologies (CATP), Sanchez Computer (SCAI) and Diamond
Technologies (DIMD). This year, SFE unveiled its e-commerce and
backbone-focused Internet strategy, which includes investments in such
companies as 4anything.com and Internet Capital Group.
Another peer with some history is London Pacific Group (LPGL), the U.K.'s
distant cousin to CMGI. LPGL has invested over $1.5 billion in later-stage,
private companies over the past two decades, including AOL, 3Com (COMS),
NETG and Oracle (ORCL). This conglomerate includes a life insurance
subsidiary, selectadvisors.com and two venture capital groups. Its more
recent Net investments include NetPerceptions (NETP) and three upcoming
IPOs: Packeteer (PKTR), RedCreek Communications and Continuous Software
Corporation (CNSW).
Owning a chunk of IPOs – such as e-commerce company Cyberian Outpost
(COOL), ISP Juno (JWEB), cable-Internet tv firm Worldgate Communications
(WGAT) and live-Net technology provider Mpath (MPTH) – enabled Winfield
Capital's (WCAP) stock to run from single digits to the mid-60s. The recent
market downturn brought WCAP's price to the 20s, but the company is banking
on future IPOs such as CommerceOne and the Wedding Network to increase its
value.
Among the newer entrants in the Internet VC field are Premiere Technologies
(PTEK) and Rare Medium (RRRR). PTEK has some unique Internet/telephone
applications to go along with investments in such companies as WebMD (now
Healtheon) and USA.Net (MBOX), as well as future IPOs VerticalOne,
Intellivoice and Webforia. Rare Medium (RRRR), a former air conditioning
company, cut its Net teeth designing web sites for the likes of Microsoft,
the New York Times and General Mills. A recent $75 million infusion of
capital from Apollo Management enabled Rare Medium to pursue a CMGI-like
strategy of buying private companies – such as liveuniverse.com, MP3Now,
MP3place.net and Regards.com – for a broader purpose.
Finally, don't think the Pacific Rim is without its versions of CMGI.
Japanese conglomerate Softbank fits the bill with its astute investments in
such Internet giants as Yahoo (YHOO), Broadcast.com (BCST), E-trade (EGRP)
and Ziff-Davis (ZD). Then there's Hong Kong's Ziasun (ZSUN), the “Chinese
CMGI” which boasts several potential spin-offs as well as the usual
bulletin-board stock uncertainties.
Will any of these companies become the next CMGI? It's possible, as
anything can happen in an industry that is in its infancy. But here is why
it's doubtful:
1. None have a CEO who seems to understand the Internet and its potential
like David Wetherell.
2. None have amassed the quality or quantity of Internet growth companies
as CMGI. The company sees some 1,000 business plans per month, and chooses
only 1 or 2 of these to invest in. It could have as many as 14 IPOs in the
next two years.
3. None are as effective at cross-pollinating its companies to augment the
development of their business. CMGI's RagingBull financial web site, for
example, is hosted on CMGI-owned NaviSite and gets its banner ads served by
CMGI's Adsmart.
Every business wants to be the best – or at the least – be like the best.
You won't find many firms claiming to be the “next Pointcast.”
As the Internet venture capital industry becomes increasingly competitive,
companies will set themselves apart by their track records. Right now, CMGI
is at the top of the podium, and everyone else is running for second
place. |
